Korean Air’s earnings will be weighed down by rising fuel costs, said Cape Investment and Securities on Oct. 2 lowering the target price to 40,000 won (US$35.89) from 44,000 won while maintaining a “buy” recommendation.
Its operating profit in the third quarter will decline 6.6 percent on-year to 332 billion won. Although the passenger traffic remains at the same level as last year, costs have hiked at double-digit rates. Fuel costs in the period spiked 32.7 percent on-year to 875.1 billion won and will continue to drag down the bottom line in the next quarter, said analyst Shin Min-seok.
The number of outbound domestic tourists increased only 4.4 percent and 5.6 percent respectively in July and August, and demand is slowing down after having grown at double-digit rates since 2014, added the analyst.